A Winning Trade with Crocs
Yesterday in The War Room, a dad joke turned into a winning trade.
And from the looks of things, this particular trade still has room to move.
Here’s the story…
It all started with this post I wrote yesterday afternoon…
Attention! To all the Dads out there who love cutting their grass wearing stained white socks and ugly rubber shoes – and then wearing that same footwear combination out to dinner that same night – this trade is for you. Use the November D15 expiration to move into Crocs (Nasdaq: CROX).
You probably know what I’m talking about. Crocs sells “casual lifestyle footwear and accessories for men, women and children worldwide,” including clogs, sandals, flip-flops, slides and boots.
Crocs are currently sold in more than 90 countries through 120 retail stores, 68 kiosks, 195 outlet stores and 13 company-operated e-commerce sites.
With Crocs set to report earnings, I knew the stock was setting up for a big move. After all, the company’s last three earnings reactions were one-day moves of 16%, 12% and negative 2%. That’s why I issued a trade.
But which way would the moves go?
For us, it didn’t matter. We were simply playing a big move in either direction.
As it turned out…
Crocs confirmed that ugly plastic shoes are back in style.
The company reported a strong “beat and raise” quarter in which adjusted earnings per share came in at $0.57, which was well ahead of the FactSet guidance of $0.39.
Revenue totaled $312.8 million, which was up from $261.1 million – and beat the $302 million expectation from FactSet.
And for the full year, CEO Andrew Rees said that revenue is expected to grow 11% to 12% year over year – up from previous guidance of 9% to 11% growth. This would represent an annual sales record, he said.
Not only that, but Crocs reported today that award-winning actor, activist and entrepreneur Priyanka Chopra Jonas is the newest face of the brand – acting as global brand ambassador for the 2020 “Come As You Are” campaign.
My wife also tells me that Ariana Grande wears Crocs, which is sparking a comeback among the younger set. Combine that with the current lineup of global ambassadors like the quirky Zooey Deschanel, Suzu Hirose, Kim Se-jeong and Gina Jin – and you’re looking at a perfect time for a fashion upsurge going right into the holiday shopping season.
But here’s what I really like about Crocs…
Action Plan: Going into yesterday’s close, Crocs shares were dropping. The shorts were getting ready to pounce on a weak earnings report. But now the script has been flipped. Right now the company carries a short percentage of 13.3%. This means that all those who were short yesterday – and licking their chops in anticipation of a fall – might decide to cover their positions today, which could lead to a “short squeeze” effect. If so, Crocs has room to run higher, which is a perfect storm headed into the holiday shopping season. As you can see, Crocs has been on quite a run. But from the looks of things, it’s going even higher.
Let’s see what War Room members had to say…
“Bought CROX calls @ $1.40 and sold @ $3.51 – 150%+.” – Bruce D.
“CROX double!” – Dennis D.
“CROX calls $1.36 out @ $2.85.” – Frank
“Crox sold 85% profit $3,990.00.” – Kim C.
If you want to start making winners each trading day, you’re invited to join me in The War Room today!